Frasers Group PLC (LSE:FRAS) had some disappointing news this week as it pulled out of a planned European acquisition, but the shares were boosted as the retailer has has found a fan in Barclays, which sees worries about the trend for manufacturers to go “direct to consumer” as overplayed.
The bank made the statement prior to the Sports Direct-owner’s interim earnings results on Thursday, 7 December.
In an initiation note, analysts at the bank said they expects Frasers to emerge as one of a small circle of retailers that brands are prepared to back with high-quality products.
Nike’s chief financial officer recently mentioned Sports Direct alongside JD Sports Fashion and Dick's Sporting Goods as key partners, Barclays notes, while Adidas’ chief executive Bjørn Gulden welcomed Frasers' acquisition of SportScheck.
“We are committed and excited to support Sports Direct on their journey,” he said.
However, SportScheck yesterday filed for insolvency and Frasers put out a statement saying it had exercised its rights to withdraw from the deal - though it still sees it as "an attractive asset in one of Europe's most important markets" and so intends to work with the administrators with a view to completing the acquisition - potentially at a cheaper price.
Barclays said the comments from Nike and Adidas “reflect well on the elevation strategy under the leadership of [Frasers] chief executive Michael Murray” and the bank sees Frasers emulating JD Sports' athleisure/sports fashion success in European sporting goods.
It shows a considerable change from how things were under Frasers founder and former CEO, Mike Ashley, who for many years railed angrily at JD's closer ties with the big sports brands.
As for Frasers’ earnings guidance, the group expects profit before tax in the range of £500 million to £550 million for the current financial year.
Investors will be gauging whether the interims show strong progress towards this goal.